Professional Documents
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In the first quarter of 2032, the parties to the contract agree to modify the
contract by changing the floor plan of the building. As a result, the fixed
consideration and expected costs increased by P150,00 and P120,000
respectively. In addition, the allowable time in achieving the P200,000 bonus is
extended by 6 months to 30 months from the original contract inception date. At
the date of modification, on the basis of its experience and the remaining work to
be performed, which is primarily inside the building and not subject to weather
conditions, the entity conclude that it is highly probable that including the bonus
in the transaction price will not result in a significant reversal in the amount of
cumulative revenue recognized. Despite the changes, the contractor evaluates
that the remaining goods and services to be provided using the modified contract
are not distinct from the goods and services transferred on or before the date of
contract modification; that is, the contract remains a single performance
obligation. For the year ended December 31, 2032, Torela Company incurred
construction costs of P195,000.
Under IFRS 15, how much total revenue shall be recognized by Mcjobee
for the year ended December 31, 2016?
a. P95,000
b. P28,500
c. P6,650
d. P45,150
On December 31, 2017, MDC determined that expected value better predicts
the variable consideration it will receive regarding the early completion or delay of
the construction because of the different outcomes possible based on MDCs
current construction schedule and its experience in past projects. MDC estimate
that it is 50% likely to complete the project 10 days ahead of schedule and
receive an incentive of P250,000, 25% likely to complete the project on time and
receive no incentive and 25% likely to complete the project five days past
schedule and incur a P125,000 penalty.
As of the same date, on the other hand, MDC determined that the most likely
amount is the better predictor to estimate the variable consideration associated
with the green building certification bonus because there are only two possible
outcomes (P200,000 or P0). Based on its history of completing building projects
that achieve the green building certification level specified in the contract and the
absence of factors that may indicate the criteria will not be met, MDC decided to
include the bonus in the construction price.
On December 31, 2018, MDC did not change its estimate with respect to green
building certification bonus but after the evaluation evaluating construction
completed to date and the remaining project schedule, Contractor MDC
determines it is now 75% likely to complete the project 10 days ahead of schedule
and receive an incentive of P250,000 and 25% likely to complete the project on
time and receive no incentive bonus.
The following construction costs were provided by MDC for the years ended
December 31,2017 and 2018:
December 31, 2017 December 31, 2018
Costs incurred during the P2,400,000 P750,000
year
Estimated costs to P1,600,000 P1,350,000
complete at the end of
the year